Accredited Sues Lone Star

Updated from 6:57 a.m. EDT

Accredited Home Lenders(LEND Quote) on Monday sued private-equity firm Lone Star Capital, in an attempt to keep alive a $400 million buyout of the troubled subprime mortgage player.

San Diego-based Accredited's shares toppled 31% on Monday, after Lone Star, in a regulatory filing on Friday, revealed that it didn't expect to complete the deal based on the assumption that Accredited won't be able to satisfy certain conditions. While Accredited moved aggressively to revive the deal, an analyst for a firm advising the company said Lone Star's stance could be a shrewd negotiation tactic to get the struggling lender at a lower price.

"It's a little bit of a game of chicken," says analyst Scott Valentin of Friedman, Billings, Ramsey Group, which is acting as a financial adviser to Accredited in the deal. "The value of [Accredited's] assets have come down a lot since the deal was announced. What does Lone Star have to lose?"

Lone Star reiterated in a statement on Monday that because of "the drastic deterioration in the financial and operational condition of the company, among other things, the conditions to the closing of the tender offer for shares of Accredited would not be satisfied.

"Accordingly, Lone Star does not expect to be accepting shares tendered as of the end of the current offer period. Lone Star believes the facts will fully support its position. Lone Star looks forward to presenting these facts in Delaware Court of Chancery," it said.